NOTIFICATION

27 FEBRUARY 2016 EDITORIAL

27th FEBRUARY 2016

Cautious optimism

The Economic Survey presented in Parliament by Finance Minister Arun Jaitley reaffirms the positive growth numbers that have been projected by many global agencies, including the International Monetary Fund. Coming just a couple of days ahead of the Union Budget, the larger picture detailed by the Economic Survey should provide Mr. Jaitley a measure of confidence to show the business-friendly side of the BJP-led NDA government with a reform-oriented road map. The Survey indicates the possibility of India posting 7-plus per cent GDP (gross domestic product) growth for the third year in a row. A 7.2 per cent growth rate in 2014-15 and a possible 7.6 per cent expansion in 2015-16 must be read favourably in the context of the global slowdown and domestic concerns about the farm sector after insufficient monsoon rains followed by a warm winter. The Survey is quite optimistic about 7 to 7.75 per cent growth in the coming fiscal year - in fact, the claim is made that "conditions do exist for raising the economy's growth momentum to 8 per cent or more in the next couple of years''. Liberally lauding the government for its initiatives on the fiscal front, the Survey indicates that the Centre should be in a position to adhere to its fiscal deficit target of 3.9 per cent of GDP. A robust expansion in the service sector, accelerated growth in industry and a pick-up in IIP (Index of Industrial Production) have all, according to the Survey, created a climate of optimism. Still, given the extremely uncertain external environment, the Survey warns that "India's growth will face considerable headwinds".

It is in offering a prescription to deal with this malady of becalmed global demand that the Survey makes bold. It makes a strong and valid case for giving a big push to agriculture, health and education. It repeats the widely articulated industry demand for addressing the "exit problem" that is hurting the economy. Calling it a "Chakravyuha challenge'', the Survey lists the enormous fiscal, economic and political costs involved in sustaining incapacitated ventures. Another meaningful suggestion is that India move from a pro-industry approach to one that is "genuinely pro-competition". The growth momentum, it is felt, could well be sustained by "activating domestic sources of demand''. Interestingly, the Survey sees in the implementation of the Seventh Pay Commission recommendations a demand-booster.The Reserve Bank of India, however, has chosen to view the pay panel-induced payout from the prism of inflation. The Survey has rightly called for a quick resolution to the twin balance sheet challenges - the impaired finances of public sector banks and corporate houses. Indeed, this requires a holistic and fair solution. Suggestions such as plugging leakages in subsidy payouts, bringing more income-earners into the tax net, phasing out tax exemptions, not raising exemption threshold limits, introducing differential power tariff and imposing higher property taxes are all resource-raising options listed to deal with the resource crunch. How much of this purposefulness will in fact inform the new Budget will be ascertained on Monday.

Bolivia's Morales transformation

It may be tempting to decry Bolivia's referendum vote on February 21 as being illustrative of a drift towards autocracy by popularly elected leaders. The charismatic Evo Morales sought a mandate to run for a fourth presidential term in 2019, but it was denied in a close vote. Whatever the moral merit underlying such a judgment, the truth is that in the absence of a constitutionally stipulated limit on the President's term in office, unlike in France or in the United States, strong and popular figures tend to seek successive re-election. As regards the countries of Latin America, attempts to get around the constitutional process in this respect cut across the ideological divide. There is a common thread that runs through the contemporary experience of countries as diverse as Venezuela and Colombia. This is the memory of political volatility, U.S.-backed military dictatorships and armed insurgency, and the consequent shadow of institutional instability that often remains well after the installation of directly elected governments. In fact, Mr. Morales's bid for his current third term was similarly secured through a constitutional sanction, one that eventually culminated in his record second-best electoral performance.

That said, judging from the public mood of rejection of another electoral contest for the once near-invincible, and first indigenous, President, the outcome must seem not inconsiderable a victory for democracy, especially since the persona of Mr. Morales has been almost indistinguishable from his political rhetoric and policy initiatives. The nationalisation of natural resources and utilities matched his anti-imperialist stance. His cash-transfer schemes transformed one of Latin America's poorest countries into one of the region's fast-growing economies and in the process halved levels of extreme poverty. Cumulatively, the political stability and macroeconomic performance of the recent years are a comparison in contrast with the marginalisation of the majority indigenous population during the 1964-1982 military rule and the crippling impact of structural adjustment in the years immediately thereafter. But the result in the referendum may have put Bolivia's evolving democratic ethos at a crossroads in so far as it reflects a shift away from the large peasantry that once constituted the support base of the Movement Toward Socialism (MAS). A bulk of this segment is today an assertive, ambitious and perhaps anxious middle class that has seen much of the optimism of the boom in commodity prices and consumer spending evaporate following the slump in the global demand for oil. While there were as many incumbents in office in the five years preceding President Morales's ascent to power in 2006, MAS has apparently not thrown up the next line of leadership in the period it has been in office. Moreover, Opposition parties in Bolivia today seem to have coalesced solely on the issue of denying another term for the incumbent President. From now until the end of the Morales era, is a time for introspection.